Wednesday 25 May 2016 10:15 am

Serco share price jumps after it hikes profit forecasts for 2016

Serco jumped after the outsourcer hiked its earnings forecasts for this year, citing several longer and more profitable contracts.

It expects underlying trading profit to be no less than £65m, more than the previous estimate of £50m. This is on revenue about £2.9bn, which is also slightly above its earlier guidance of £2.8bn.

Secro shares rose as much as 12.8 per cent to 103.2p per share earlier this morning, before settling back down to 101.9 p per share.

"This is in large part due to the successful outcome of a number of commercial negotiations. The nature of most of the items driving the stronger performance is that they will sharply increase profits in the first half, but will not repeat in subsequent periods," Serco said in a statement to the London Stock Exchange today.

Serco has suffered over the last few years due to a succession of scandals, including one surrounding its tagging of criminals. But its fortunes appear to have improved since former Aggrekko chief exec Rupert Soames was brought in to turn things around.

Serco said today that several contracts had run-on beyond expectations, including its Virginia Transport and US army transition assistant contracts. And those which it's already exited are likely to be more profitable than originally thought, it added.

There are also several contracts where current trading is better than Serco expected, or where the conclusion of certain negotiations has led to updated assumptions.

The company will announce its results for the first half of this year on 4 August.